Babcock reports 6% rise in first-half revenue

Babcock International, the defence contractor and engineering support services group, reported an 11% rise in first-half earnings and confirmed its full-year targets on Tuesday.

The company said it expected little impact from continuing Brexit negotiations. Where many outsourcers have warned of contract delays due to Brexit uncertainties, Babcock insisted "the vast majority of the work we do is critical and therefore not discretionary".

To underline this, the company said it had added £2.1bn of order intake in the first half, adding that its combined order book and pipeline of short-term opportunities had increased by £1.2bn to £30.7bn.

First half highlights

• Revenue rises 6% to £2.639bn
• Operating profit up 2.3% to £275.8m
• Profit before tax up 4.9% to £239.5m
• Earnings per share rises 4% to 38.7p
• Order book down 7.5% to £18.5bn; bid pipeline up 13% to £12.2bn
• Half-year dividend up 5.4% to 6.85p a share

CEO comment

Archie Bethel, chief executive (left), said: "Babcock made good progress during the first half, building on our leadership position in the engineering services market.

"The increasing number and value of our opportunities both in the UK and internationally, where we continue to gain traction, highlights Babcock's long-proven ability to grow despite uncertain market conditions.

"We have excellent revenue visibility with 92% of budgeted revenue now in place for FY18, and we expect a slight improvement in overall group margin during the second half.

"We therefore remain confident that full year results will be in line with our expectations and that we will make further good progress beyond this year."

Market reaction

Despite Babcock's confident outlook, investors were sellers, sending the shares 2.65% lower to 734.5p in mid-morning trade on the London Stock Exchange.